Study of Extreme Local Wage Initiatives Reveals Significant Consequences for Main Street Hotels and American Workers

Potential increases could cost industry thousands of jobs, billions in economic impact

The American Hotel & Lodging Association (AH&LA) and the Asian American Hotel Owners Association (AAHOA) today released a groundbreaking new national study on the impacts of extreme local wage initiatives on the U.S. hotel industry and small businesses across the country.
The study, “Extreme Wage Initiatives and the Hotel Industry: Impact on Local Communities and the Nation,” was conducted by John W. O’Neill, Ph.D., director of the school of hospitality management at The Pennsylvania State University, and is the first of its kind to examine in detail the potential negative economic consequences of extreme local wage initiatives.  One key area of focus is the current proposal in Los Angeles, California to increase the local wage for hotel workers to $15.37 per hour.  The study finds that implementation of this increase could result in:  
•A total job loss of 1,394 hotel staff positions;
•A loss of $106.1 million in annual guest room revenue;
•$16.4 million in lost hotel occupancy taxes;
•$2.9 million in lower corporate taxes; and
•A loss of $20.1 million in hotel values.
Most significantly, the report states, “[i]t is important to note that those in the hotel industry who would be most negatively affected by extreme minimum wage increases would be small business entrepreneurs who only own one or two hotels as their primary source of income.”   
“The lodging industry – many members of which are small employers – has countless stories of men and women who have used ladders of opportunity to experience upward mobility and advancement into successful careers,” said Katherine Lugar, AH&LA president/CEO.  “They have been able to enjoy this success because of the flexibility their employers have in setting wages and benefits.  As this report demonstrates – and as we have seen reflected in other estimates – extreme wage increases could severely inhibit future growth and cost our economy billions of dollars.  Already, the U.S. Senate refused to take action on a national minimum wage increase after the Congressional Budget Office estimated that increasing it could lead to the loss of 500,000 jobs nationwide.  As an industry, we should not be faced with such a significant economic hit and, more importantly, the loss of employment for thousands of valued and hard-working men and women.  These are risks we simply cannot afford to take.”  
“Hospitality is at the forefront of providing good jobs to working-class Americans.  Hoteliers, in particular, take great pride in offering entry-level opportunities that few other industries make available to young people,” AAHOA Chairman Pratik Patel said.  “These jobs create an initial access to the workforce and the foundation for successful careers.  For that reason, AAHOA is troubled by the current proposals to dramatically increase the minimum wage.  This report clearly illustrates the destructive impact these proposals will have on entry-level workers and job opportunities.  As small business owners, hoteliers are pillars of local communities.  Our members own and operate hotels in thousands of communities across the United States.  Guests often recognize us by the national brands we operate, but make no mistake, these are small business men and women who collectively help provide good local jobs to hundreds of thousands of Americans.  As the report indicates, dramatic, and artificial, changes to wages will significantly impact opportunities for employment. Tens of thousands of young people will never be given the chance to start a hospitality career or gain the incredible benefits of working in our industry.”   
The report also examines the overall potential impacts of an increase in the national minimum wage to $10.10 per hour, similar to the proposal introduced by Senator Tom Harkin (D-IA) that was blocked in the Senate.  Nationally, such an increase could have an estimated annual impact to the lodging industry of $2.53 billion and result in sluggish hotel performance.  In particular, these negative consequences could include:  
•A total job loss of 12,195 hotel staff positions;
•A loss of $612.3 million in annual guest room revenue;
•$70.4 million in lost hotel occupancy taxes;
•$146.2 million in lower corporate taxes; and
•A loss of $1.02 billion in hotel values.
A copy of the wage study is available here.